True friend or security threat? Japan dumbfounded by US Steel deal veto

The decision underscores the difficulty of 'friendshoring' and could deter some foreign investments in the US, expert says

- Walter Sim

What does it mean to be a friend and an ally? The US has in the past trumpeted Japan as its "true friend", their bilateral alliance the "bedrock" of Indo-Pacific security, with Japan hosting more than 50,000 American troops.

Yet these words now ring hollow after US President Joe Biden wielded stark, incendiary language to block a US$14.9 billion (S$20.3 billion) bid by Japan's Nippon Steel to acquire US Steel, saying there was "credible evidence" that Nippon Steel "might take action that threatens to impair the national security" of the US.

This has come as a rude wake-up call at best and a stunning betrayal at worst, as Japan's political and business circles scramble to decipher the meaning behind his words.

Japanese leaders, including Prime Minister Shigeru Ishiba, have voiced regret and disappointment as they demand answers.

"Unless the US properly explains the rationale of their decision to label Japan a 'national security' concern, there is no starting point for further discussions," said Mr Ishiba.

"No matter how much of an ally we are, clarifying this point is extremely important to determine our future relationship."

Ms Asuka Tatebayashi, a senior analyst in Mizuho Bank's global strategic advisory department, told The Straits Times: "National security has become such a convenient term to explain away their economic protectionism - it's vague and it appears the definitions are widening.

"It's very important to get clarity because Japan needs to understand the reasoning for future reference and future investments.

"The decision also confirms the extent of how entrenched protectionism has become in the US, regardless of the administration in power."

Mr Biden's veto, which was met by furious indignation and incomprehension in Tokyo even if it was not entirely unexpected given the President's blue-collar roots, comes days before he vacates the White House for the mercurial Donald Trump.